Should the government give loans to help ethanol plants? How will this impact livestock producers?

The American Meat Institute, joined by seven other livestock and poultry organizations, this week wrote Agriculture Secretary Ed Schafer objecting to comments he made that USDA would extend rural development loans to ethanol plants that bought corn at the higher prices that prevailed earlier this year.

The American Meat Institute, joined by seven other livestock and poultry organizations, this week wrote Agriculture Secretary Ed Schafer objecting to comments he made that USDA would extend rural development loans to ethanol plants that bought corn at the higher prices that prevailed earlier this year.

“We in animal agriculture are particularly concerned that you would consider adding one more level of support for the corn-based ethanol industry. The federal government already supports ethanol producers through the Renewable Fuel Standard mandate; the blender’s credit for fuel companies that utilize ethanol; and a tariff on imported ethanol. The three legs of support for domestic ethanol have already had a serious impact on animal agriculture,” the groups told Schafer.

The letter was signed by AMI President and CEO J. Patrick Boyle, along with leaders of the National Cattlemen's Beef Association, National Chicken Council, National Meat Association, National Milk Producers Federation, National Pork Producers Council, National Turkey Federation and the United Egg Producers.

The letter says that the high price of corn has already caused real pain in animal agriculture. For example, poultry companies have already been forced to close several plants, and more than 3,000 jobs have been lost. These industries are relatively labor-intensive, so that closing a meatpacking or poultry processing plant involves much higher job losses in a community than closing an ethanol plant.

“High commodity prices have been wreaking havoc in animal agriculture for almost two years. Yet no one at USDA has suggested that the government could provide loan funds to cover our members’ losses in the corn market,” the letter states.

The letter also notes that there is little question that the ethanol industry has overbuilt itself. The industry has 13.7 billion gallons of annual capacity existing, in expansion, or under construction. However, the mandated demand under the Renewable Fuel Standard is only nine billion gallons in 2008 and 10.5 billion gallons in 2009.

“We urge you to rethink your intention of selectively lending taxpayer funds to private facilities that are having difficulty with the price of commodities. As stated before, USDA told the livestock industry to ‘ride’ the high commodity prices for a few years. Despite numerous requests to create a task force to address the negative consequences of ethanol mandates in feed prices, USDA did nothing. It is not clear to us why now USDA would be so inclined to provide assistance to one particular segment of the industry in dealing with a problem that affects us all,” the letter concludes.